24-Hour Trading: A Boon for International Investors Amidst Global Events

Trading U.S. stocks has become increasingly convenient with the expansion of 24-hour trading options, particularly benefiting international investors. The traditional trading hours from 9:30 a.m. to 4 p.m. EST work well for those who live on the East Coast, but for West Coast traders or international investors in regions like Japan, the scheduling becomes a challenge. As technology continues to advance and the globalized financial landscape evolves, the need for extended and round-the-clock trading has never been more pronounced.

Innovations in Trading Hours

The concept of 24-hour trading is not entirely new, as U.S. futures markets already operate from Sunday evening to Friday afternoon Central Time. Moreover, commodity markets have also provided around-the-clock trading opportunities on weekdays, and the crypto market operates 24/7 without delay. However, the major U.S. stock exchanges have maintained limited trading hours since 1985.

Recognizing the changing needs of investors, the New York Stock Exchange recently announced plans to extend trading hours for its electronic Arca Exchange from 1:30 a.m. to 11:30 p.m. EST, a move set to expand trading from 16 to 22 hours a day. Similarly, brokerages like Charles Schwab Corp. have announced initiatives to deepen their 24-hour trading capabilities, allowing investors to trade all stocks in the S&P 500 and Nasdaq 100, in addition to hundreds of exchange-traded funds (ETFs).

Global Demand and Technological Support

Blue Ocean Technologies has emerged as a key player in this evolving trading landscape, helping brokerages expand their 24-hour trading capabilities. Operating its alternative trading system (ATS) from 8 p.m. to 4 a.m. EST, Blue Ocean collaborates with over 50 brokerages, including Robinhood Markets and Webull. Brian Hyndman, Blue Ocean’s CEO, indicated that most of their business is derived from the Asia-Pacific region, where there is significant investor activity.

With time zone differences, many Asian traders are unable to access U.S. markets during their business hours, making round-the-clock trading not just attractive but necessary. Blue Ocean has reported trading volumes between 30 to 40 million shares on any given night, indicating the robust demand for after-hours trading.

Challenges and Adaptations in Trading Systems

The rapid increase in overnight trading volume has necessitated better technological infrastructure. For instance, earlier this year, Blue Ocean partnered with the MEMX stock exchange to improve its order matching capabilities, thereby significantly enhancing its capacity to process trades. However, the need for such robust systems was underscored by an incident on August 5, when volatility in Asian markets led to a temporary system crash on Blue Ocean’s platform.

Events like this highlight the urgent requirement for brokerages to be prepared for unexpected spikes in trading volume stemming from international events. For example, during the recent turmoil in Japanese markets, Interactive Brokers observed a significant increase in overnight trading activity.

Market Volatility and Preparedness

As financial systems from around the globe become increasingly interconnected, events occurring across continents can significantly influence international markets. This interconnectedness has been evident in the aftermath of geopolitical tensions, such as those arising from the Russia-Ukraine conflict, or the escalation of tensions in the Middle East. U.S.-based market events, like elections, can equally move the needle in both domestic and international markets, leading to spikes in volatility.

Steve Sanders of Interactive Brokers indicated that election nights, such as in 2016, saw a surge in overnight trading volume as results were declared. He expressed confidence in the brokerage’s capability to manage such increases in volume, further emphasizing the need for continuous technological advancements and preparations for unforeseen events.

The Future of 24-Hour Trading

The shift towards 24-hour trading is indicative of a more connected and responsive trading environment that caters to an increasingly global investor base. With advancements in technology and evolving market demands, brokerages are positioning themselves to meet the needs of traders seeking opportunities around the clock.

As financial systems and international trading environments adapt, the future of trading seems optimistic and accessible, reflecting an important evolution in the financial landscape that enables traders to seize opportunities at any time, thus enhancing market liquidity and global participation.

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24-Hour Trading Revolution: Empowering International Investors in a Dynamic Market